Daily Newsletter 6/4/25
As you are aware, we make it a priority to share our big-picture market outlook with you on a daily basis. Our goal is to keep you fully informed about the key drivers shaping the financial markets and to provide timely insights into emerging trends and potential opportunities. While our medium-term perspective remains consistent, we believe that staying agile and responsive to the latest developments is essential for maximizing returns and managing risk. By combining our macro-driven approach with technical analysis and careful attention to news flow, we ensure that our strategies are always grounded in both a broad understanding of the market landscape and the most current market dynamics. This disciplined process allows us to spot inflection points early and adjust our positioning accordingly, all while keeping you in the loop every step of the way.
US-China Trade Tensions and the Battle for Supply Chain Control
Recent U.S.-China trade tensions have once again taken center stage, with both countries locked in a cycle of escalating tariffs and countermeasures. While a temporary truce in May 2025 led to a sharp reduction in some tariffs—down to a 10% base rate from earlier highs—the underlying friction persists, particularly over rare earth elements critical for technology and defense. China’s dominance in rare earth production and processing has given it significant leverage, as recent export restrictions on these materials have threatened to disrupt global supply chains and manufacturing, especially in sectors like semiconductors and electric vehicles. The uncertainty around these trade barriers continues to weigh on businesses and investors, who remain wary of further supply chain interruptions and regulatory shocks.
Despite recent diplomatic overtures and a renewed consultative mechanism between Washington and Beijing, long-term resolution remains elusive. The trade war has already taken a toll, with U.S. GDP recording its first quarterly decline since 2022 and Chinese manufacturing activity contracting sharply. Both sides are now grappling with the economic fallout, while global markets watch closely for signs of stability or renewed escalation. For now, rare earth supply chain risks and the specter of new tariffs loom large, underscoring the fragility of the current détente and the need for businesses to stay nimble in the face of ongoing uncertainty.
Traders are reacting to the renewed U.S.-China trade tensions with a mix of caution and measured optimism. Initially, risk appetite dipped as tariff anxieties and accusations of breached agreements dominated sentiment, leading to a lukewarm start for equities and pressure on the dollar. However, markets have shown resilience, with some late rebounds as investors digest both negative trade headlines and positive economic data. Some are using the uncertainty as an opportunity to seek safe havens like gold, which has seen modest gains amid trade tensions and a softer dollar.
Meanwhile, tariffs, once seen as a revenue booster, are underperforming, further complicating the fiscal picture. This underscores the delicate balancing act of economic policy, with tough choices looming.
Fiscal Deficit
We have consistently highlighted the diminishing fiscal flexibility facing policymakers today. The rapidly expanding deficit stands out as one of the most pressing economic challenges ahead. Should the current budget proposal be enacted, we anticipate a substantial increase in this year’s deficit—an outcome that would intensify pressure on government finances and potentially unsettle market confidence. However, the final decision rests with the Senate, whose deliberations are likely to significantly influence the ultimate outcome. Their vote could either mitigate the fiscal impact or prompt a realignment of spending priorities.
Much attention will continue to focus on public debt levels, as these figures are straightforward to measure and communicate, making them a convenient focal point for economic discussions. In our view, the core issue is not simply the absolute level of debt, but rather the growing burden of interest payments on U.S. Treasuries and the broader implications for fiscal sustainability.
As you follow debates on public debt, it is important to remember that sustainability hinges on the relationship between economic growth (g) and the real interest rate on government debt (r). As long as the economy’s growth rate remains above the real interest rate, debt dynamics should remain manageable. However, should growth fall below the real interest rate—a scenario we hope to avoid—it could signal the emergence of significant fiscal challenges and heightened risks to long-term stability
Amid these headwinds, we remain focused on the economy’s underlying strengths—the resilient pillars that keep markets steady even when risks rise. We’ll soon dive deeper into these fundamentals in a dedicated post, exploring why they matter and how they shape our investment outlook.
While optimism is warranted, we stay vigilant—always monitoring risks, ready to adapt as new data arrives. This disciplined, balanced approach is central to our strategy, helping us confidently navigate market volatility.
OUR TRADES
Below, you will find our portfolio, which is divided into two sections: the Tactical Portfolio and the Medium-to-Long-Term Portfolio.
We share all entry and exit points of our tactical trades with our paid subscribers, along with detailed explanations for why each trade was initiated.
Yesterday, we added GD and GLTR to our portfolio, seizing the opportunity presented by recent positive developments around both companies. While these moves were motivated in part by encouraging news, they also align with our broader focus on identifying value and momentum within the market.
Dollar General recently reported strong quarterly results, with net sales up 5.3% and same-store sales rising 2.4%—both beating expectations. The company is attracting more middle- and higher-income shoppers seeking value amid inflation and tariff concerns. Despite ongoing financial pressures on its core lower-income customers, Dollar General raised its annual sales and profit guidance, reflecting confidence in its ability to thrive in a challenging economic environment. The stock surged as a result, highlighting Dollar General’s resilience and appeal to a broader range of consumers.
We currently favor Dollar General (DG) over Dollar Tree (DLTR), as our technical and macro analysis points to stronger momentum and potential for DG. While we recognize that yesterday’s significant gains could lead to a pullback or consolidation today, our latest technical indicators suggest that any retracement is likely to be modest, and both stocks remain in promising uptrends.
As always, we’re closely monitoring both positions, especially since we don’t always hedge our tactical trades. Below, you’ll find the results of our technical analysis on DG and DLTR. While these numbers are from yesterday and may have shifted slightly, they still illustrate the rationale behind our recent initiation of these positions.
It’s important to note that every trade we make is the result of rigorous fundamental and technical analysis, combined with our macro-driven perspective. We never add a position to our portfolio based solely on news—this disciplined, multifaceted approach is the foundation of our tactical strategy.
Dollar General (DG) Technical Analysis-Snapshot
Price and Trend Overview
Dollar General (DG) surged over 15% in a single session following a strong Q1 2025 earnings beat, with the stock reaching intraday highs near $112.77 and closing near $108.98. The year-to-date return exceeds 27%, reflecting robust momentum and renewed investor confidence.
Bollinger Bands
DG is trading near the upper Bollinger Band, signaling potential short-term overbought conditions. This often precedes a period of consolidation or a modest pullback as the market digests recent gains.
MACD
The MACD line is well above the signal line, confirming strong bullish momentum. However, the histogram shows signs of flattening, suggesting that while the trend remains upward, the pace of gains may slow in the near term.
RSI
The RSI is above 70, indicating overbought territory. This supports the view that a short-term pause or correction could be due, though it also reflects strong buying interest.
Williams %R
Williams %R is likely in oversold reversal territory when viewed over longer timeframes, but with the current spike, it may be flashing short-term reversal signals—suggesting caution for new buyers at these levels.
OBV (On-Balance Volume)
OBV is rising sharply, confirming strong accumulation and positive volume flow into the stock. This supports the bullish case for continued upside or at least strong support on pullbacks.
Support and Resistance
Support:
$106.08: Today’s low, now acting as dynamic support.
$97.00: Pivotal support, recently tested and held, providing a floor for any pullback.
$92.11: 50-day moving average, a key technical backstop.
Resistance:
$112.77: Today’s high, immediate resistance.
$120.00: Analyst price target and psychological resistance.
$141.24: 52-week high, long-term resistance.
Fibonacci Levels
Using the recent low near $97 and the intraday high near $112.77:
0.618 Retracement: ~$106.00 (coincides with today’s low and a key support/resistance pivot).
0.50 Retracement: ~$104.89.
0.382 Retracement: ~$103.78.
Options and Sentiment
Options activity has been unusually high, with a split sentiment: 46% bullish and 53% bearish among large traders, focusing on a price range between $83 and $130.
The Fear & Greed Index is at 39 (Fear), and overall sentiment is neutral, suggesting some caution despite the bullish price action
Summary:
Dollar General is riding a wave of positive momentum following stellar earnings and a raised outlook, with technical indicators largely confirming the bullish case. The technical setup and analyst upgrades both point to a bullish outlook in the near term, provided the stock holds above recent support levels.
However, the stock is now overbought on several metrics, suggesting that while the trend remains intact, a short-term consolidation or mild pullback is likely before further gains. Support at $106 and $97 is critical; as long as these levels hold, the broader uptrend is secure. Accumulation remains strong, and any retracement should be viewed as a potential buying opportunity for those seeking to participate in DG’s ongoing recovery and growth story.
Dollar Tree Technical (DLTR) Analysis-Snapshot
Price and Trend Context
Dollar Tree (DLTR) is trading above its key moving averages, with the 50-day SMA around $79.69 and the 200-day SMA at $74.24, signaling a strong uptrend and constructive technical posture. The stock recently tested highs near $90–$91, with analysts’ price targets now reaching up to $100 following positive sentiment and upward revisions.
Bollinger Bands (82.52, 88.25, 93.98)
DLTR is trading near the upper band (93.98), indicating the stock is at the high end of its recent range and may be overbought in the short term. This often precedes consolidation or a brief pullback, but it also confirms strong upward momentum.
RSI (72.07)
The RSI is above 70, confirming overbought conditions. While this suggests the stock may be due for a pause or retracement, it also reflects strong buying interest and bullish sentiment.
Williams %R (-1.16)
A Williams %R of -1.16 is deep in overbought territory, reinforcing the likelihood of a short-term pullback or consolidation. This indicator is often used to spot potential reversal points after strong rallies.
OBV (-3.17)
The negative On-Balance Volume (OBV) suggests that, despite the recent price rise, there has been net selling pressure or distribution. This divergence could signal caution, as price gains aren’t being fully supported by volume.
MACD (3.29)
The MACD line is positive and above its signal line, indicating ongoing bullish momentum. The histogram value (3.29) is healthy, but traders should watch for any flattening or crossover for early signs of a slowdown.
CCI (229)
The Commodity Channel Index (CCI) is extremely high at 229, far above the typical overbought threshold (above +100). This signals a very strong trend, but also warns of potential exhaustion and the risk of a sharp correction.
Support and Resistance
Support:
$88.25 (middle Bollinger Band): Key short-term support.
$82.52 (lower Bollinger Band): Stronger support, aligns with recent pivot lows.
$79.69 (50-day SMA): Major technical backstop.
Resistance:
$93.98 (upper Bollinger Band): Immediate resistance and recent high.
$100.00: Analyst price target and psychological resistance.
$121.92: 52-week high, representing long-term resistance.
Fibonacci Levels
Using a recent low near $82 and a recent high near $94:
0.618 Retracement: ~$86.60 (aligns with middle Bollinger Band and recent support).
0.50 Retracement: ~$88.00 (matches middle Bollinger Band).
0.382 Retracement: ~$89.40 (short-term support).
Summary:
Dollar Tree (DLTR) is exhibiting strong technical momentum, trading at the upper end of its Bollinger Bands with a high RSI, extreme CCI, and deeply overbought Williams %R—all signaling a robust uptrend but also warning of potential short-term exhaustion. The negative OBV introduces a note of caution, suggesting that not all price gains are backed by strong volume, which could lead to volatility or a pullback. MACD remains bullish, supporting the idea that the trend is intact for now.
Support is well-defined at $88.25 and $82.52, with the 50-day SMA providing additional downside protection. Resistance is immediate at $93.98 and then at the $100 analyst target. Traders should remain alert for signs of consolidation or profit-taking, but the overall technical setup remains constructive as long as key support levels hold. Any pullback could present a buying opportunity for those looking to participate in DLTR’s ongoing recovery and growth story.